Pyramid & Gifting Schemes

What is a Pyramid Scheme?

A pyramid scheme is an illegal moneymaking scam. It is called a “pyramid” because of the scam’s visual structure, with a couple participants at the top, a few in the middle, and a greater number at the bottom. Each level of the pyramid recruits new participants who pay money to join the pyramid. The money circulates among the participants and creates no new wealth.

Although a few people might come out ahead, many more will lose money when the pyramid collapses. As the pyramid expands, it requires recruiting new members at a geometrically expanding rate.

Whether they intend to or not, participants in a pyramid deceive those they recruit. Few people would be fooled into joining if the risks were fully explained.

What is a Gifting Scheme?

Gifting schemes are gaining popularity in Idaho. A relative, friend or acquaintance may tell you about an “opportunity” to reduce your financial burden by making a monetary "gift" to a gifting circle or a women’s fund. For your gift, you are promised great rewards in return.

Although payments in pyramid schemes are often referred to as "gifts," in reality they are not gifts because the “giver” expects to receive something in return—usually money.
Gifters may claim they have protection under federal tax law. This is a lie.

What are the Consequences of Participating in a Pyramid or Gifting Scheme?

Promoting or participating in a pyramid or gifting scheme violates the Idaho Consumer Protection Act. It also is a felony that is punishable by up to 5 years in prison, a fine of up to $50,000 or both. Violators of the Consumer Protection Act are subject to civil penalties of $5,000 per violation.